Michael I usually don't do this but I'm Going to go lifo fifo on you which you Know you and I studied in school life of Fifo is back and that means inventories Out the door Target's one of the best Run machines we have the Swiss Watch of Inventory management what are you Learning about all of retail's inventory Agony from Target Uh the the retailers have done a really Good job in 2022 realizing that they've Made a mistake and and working through It uh this inventory issue I really hurt A lot of retailers in 2022 just about a Year ago everyone was pulled up and they Got really over assorted I'm Particularly trying to bring in Inventory early in front of the supply Chain issues that we had last year and Everyone just got over assorted that was A big problem but the retailers realize It quickly right around March or April Of last year and and aggressively moved Market down uh and it was a tough year For a lot of the retailers but but I Think they got it done you make clear in Your note you look at it as a pandemic One-off in the Target and others will Return you raise your price Target and Uh Target a couple days though price Target on target a couple days ago I got That out but Michael Baker what's the Timeline where they clear the inventory Challenge is it now is it into 2024
No they they did it uh their inventories In the quarter just reported as of this Morning were uh it was either up or down Three percent I have the press release Right here it was essentially flat uh uh Three percent down three percent at the End of the fourth quarter at the end of The third quarter we're up to 14 Mid-year is I think 35 and 45 growth so So they really uh succeeded in in Clearing out those inventories and they Start 2023 clean my class inventory Issue is now behind them it's no longer An issue I was looking at Lines as they came across after the Earnings dropped and I was pretty Confused they seemed pretty negative and They also seemed kind of Motley looked At an earnings drop a profit drop of 43 Percent in the fourth quarter a forecast That came in under expectations the Shares are now Higher by 4.6 percent how Do you make sense of this yeah that Doesn't surprise me uh for two reasons Three reasons you keep in point two one Uh this is exactly what happened with Walmart uh last week Walmart reported a A beat in the fourth quarter uh gave Guidance that was below consensus and Arguably conservative the stock opened Down in the pre-market and then uh and Then ended up being up it's exactly what We're seeing with Target right now uh I Think the idea here is that margins are
Going to be better uh margins will will Will hit their low in 2022 and they're Going to be higher in 2023. so the Analysts got a little bit uh too high in Their estimates I think the consensus Assessment for next year is 5.3 we're at 4.7 they guided to something that'll be Around four and a half after five or so That's up from three and a half in 2022. So that's a good number we're growing Next year we're just not quite growing As fast uh or recovering as quickly as The consensus estimates wanted but two Things one those consensus to me are Probably conservatives and secondly We're heading in the right direction 2022 was the trough for Target 2023 will Be better in 2024 even beyond that uh it Might take a little bit longer than the Consensus forecasts uh had but to me That's just a function of the analysts Getting a little bit too a little bit Too aggressive
